It is ironic that “libertarian scholars [fail] to enthusiastically embrace a couple billionaires’ putative property rights” over the Cato Institute

Cato Scholar Julian Sanchez argues that there is nothing ironic or hypocritical about members of the Cato Institute manning the barricades against Charles and David Kochs' lawsuit to obtain a controlling stake in the institution (Kochs' complaint here). He is wrong; it is highly hypocritical.

On the standard libertarian view, property rights are created through productive effort and exchanged through voluntary transactions. They are pre-legal, moral rights and not violating them is a big part of the libertarian prime directive (so big that they cannot even be violated to provide the destitute with “food, shelter, health care, employment”).

The Kochs, Cato President Ed Crane, and a few others got together in the 1970s, created the Cato Institute, divided property rights in it equally among the different founders, and provided that "[n]o stockholder of the Corporation shall have the right or power to pledge, hypothecate, sell or otherwise dispose of, directly or indirectly, all or any part of his shares of stock without first offering to sell such shares as he desires to dispose of to the Corporation for a price equivalent to the price paid by such shareholder for such shares." Cato Chairman Bob Levy effectively concedes that, regardless of its current legal effect under Kansas corporate law, this agreement was intended and understood to prohibit the disposition of shares by devise (including William Niskanen's shares that are presently at issue):

Levy explains to National Review Online that “the way forward is to abandon this shareholder structure, substitute a structure where the institute is controlled by members, the way just about every non-profit in the world is, and those members would be the board of directors themselves, so that we have a self-perpetuating board.”

Abandoning the shareholder structure is the way forward for Levy because the current structure doesn’t enable a self-perpetuating board (including a board that self-perpetuates by decedent members’ willing their shares away).

But despite the fact that the Niskanen shares are not to be devised – should have been tendered to the Corporation for repurchase (a collateral consequence of which would have been the Kochs’ obtaining a controlling stake in Cato) – Crane, with the apparent approval of his scholars, has vowed to use Kansas law to try to destroy the scheme of property rights upon which Cato’s founders agreed. Maybe he has a sufficiently plausible legal argument (we can punt that one to the “experts in Kansas corporate law” to whom Sanchez glibly adverts), but so what? The law has been known to disrespect property rights in the past. And given that property rights have lexical priority over act-consequentialist considerations in libertarian morality, it is hypocritical for libertarians to focus all of their energies on lamenting, and fighting in the press, the Kochs’ “takeover attempt” without a word about what, by libertarian lights, is a violation of the Kochs’ moral rights.

Where’s the rousing defense of the right to make an unwise decision? Where’s the reminder that the ends don’t justify the means? That rights are to be taken seriously? That legality does not excuse wrongdoing? When the exercise of those rights hits too close to where libertarians earn their daily bread, nowhere.